Data analysed by The Corporate Finance Network found that 65 per cent of UK SMEs have poor credit ratings.
In previous recessions many businesses have gone bust despite the economy turning a corner, a phenomenom known as “insolvency lag”.
Kirsty McGregor, of The Corporate Finance Network, said: “These businesses are currently surviving through the support of HMRC, the banks & low interest rates.
“The time is fast approaching where that artificial economy will come to an end and businesses will either turn the corner, or fold.
“Businesses can only improve their situation if they truly accept that they aren’t in the best place to grow.
“Typically warning signs for owners that their business is at risk from the upturn are if they struggling to pay creditors or HMRC within agreed payment dates; unable to get credit for even the simplest of agreements, such as leases on office equipment; and of course, the most obvious sign is reported losses or a reduced gross margin.”
The Corporate Finance Network’s three tips for businesses to ensure they survive the upturn:
1. Undertake a strict review of the state of the business’s health, its productivity and profitability – be aware of your detailed figures, be willing to lose ‘top line’ sales if they aren’t producing healthy margins, and free up resources to target a better quality of turnover;
2. Build a plan for growth – review the business’s current working capital cycle and identify requirements in the coming months and years;
3. Be brave and be prepared to take action! Alternative solutions, finance facilities and restructuring plans are all readily available in this market, both for strong businesses and also those in trouble. However, leaving it too late will reduce the options available to you.
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